If you can afford to live in a certain section of town your ethnicity should not be a factor. And if, when peace comes to the region Arabs find themselves on the Israeli side of town and they chose to stay they'd be Israelis. If Jews find themselves on the Arab side of town and they choose to stay they'd be Palestinian. For Israel to build in a section of town that may ultimately be ceded to the Arabs sounds dumb and wasteful. If you need to build new housing so badly build it on the Israeli side of town in an area that is not in dispute.
Mexico: Death toll 27 after truck hits religious procession (AP)
from the article: Jerusalem master plan: Expansion of Jewish enclaves across the city